Chunghwa Telecom Co (中華電信) entered the last stage for privatization yesterday after the government offloaded 135.1 million American Depositary Receipts (ADRs), or a 14 percent stake, at US$18.98 per unit to overseas investors, contributing US$2.56 billion to the state's coffers.
The share sale was announced after the close of trading at the New York Stock Exchange on Tuesday.
Each ADR is equal to 10 common shares.
PHOTO: AFP
The offering price of US$18.98 per ADR (equivalent to NT$60.67 per common share) represents a 0.5 percent discount on the company's closing share price of NT$61 on the local bourse on Tuesday, and a 3 percent discount on the company's closing price of US$19.57 traded on the New York Stock Exchange on Tuesday, according to a Chunghwa Telecom press release yesterday.
The overseas sale, together with the government's auction of a 3 percent stake, or 289.43 million shares, to domestic investors on Tuesday, helped reduce the government's holding in the nation's biggest telecommunications company from 65 percent to around 48 percent.
That means Chunghwa Telecom is now technically a private entity, according to the government's definition of a privatization.
As the ADR news was released during TAIEX trading yesterday, Chunghwa Telecom's shares got a boost and closed NT$1.5 higher at NT$62.50, a 2.46 percent rise, which one analyst said showed investor confidence was bouncing back.
"Investors have welcomed the privatization of Chunghwa Telecom as it will help reduce personnel costs and streamline company operations, enhancing its competitiveness. I expect its share price will gradually climb in the near term," said Lu Chia-lin (
Clouded by uncertainties about whether privatization would proceed smoothly, Chunghwa Telecom shares dropped 3.8 percent last Thursday after company chairman Hochen Tan (賀陳旦) announced the domestic share sale for Tuesday. They dropped another 3 percent on Monday.
Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor's, said Chunghwa Telecom's ratings would not be affected by the sale of the government's stake.
"The ratings do not take government support into consideration, as Taiwan's telecom market is deregulated and the government has long planned to privatize the company," Taiwan Ratings said in a statement. "The ratings reflect the company's superior position in Taiwan's telecommunications industry and its very strong financial profile."
Upon receiving the news that the ADR sale was proceeding smoothly, the company's labor union called off its hunger strike at noon yesterday. The 18-hour strike had been called to protest the privatization plan.
But before ending the strike, the union members went to the Democratic Progressive Party's headquarters in Taipei to protest the government's "disregard" of employees' rights, said Chuang Ping-tang (
The union has refused to sign a collective agreement regarding employees benefits and pensions after privatization.
The telecom giant faces internal and external challenges, its former chairman said at a forum in Taipei yesterday.
It has to provide creative services to compete head-on with smaller rivals, especially when the data-oriented third-generation (3G) mobile technology catches on later this year, said Mao Chi-kuo (
The company will have to adjust its mindset, establish an effective system of rewards and penalties and revitalize manpower by encouraging elderly workers to retire so new blood can be hired, he said.
Chunghwa Telecom yesterday reported revenue of NT$15.52 billion for last month and NT$105.2 billion for the first seven months of the year. Its unaudited after-tax profits for the first seven months reached NT$28.6 billion, or NT$2.96 per share, according to a statement to the Taiwan Stock Exchange.
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